Md. Code Regs. 05.06.06.15

Current through Register Vol. 51, No. 24, December 2, 2024

Section 05.06.06.15 - Claims

A. Filing.

(1) A claim may not be settled by the Fund until the lender has:

(a) Implemented the actions prescribed by the Fund to cure a defaulted mortgage loan; and

(b) Submitted to the Fund an application for settlement of a claim.

(2) A lender shall submit its claims on the Fund forms within 30 calendar days from the date of:

(a) A written request from the Fund to file a claim in the case of loan assignment under §D(1) of this regulation or fixed percentage settlement under §D(2) of this regulation; or

(b) The transfer of title under §D(3) or (4) of this regulation.

B. Computation of Claims. The computation of a claim shall be made by:

(1) Adding together the following amounts:

(a) Unpaid principal balance due under the mortgage;

(b) Interest at the mortgage rate, not at a default or penalty rate, through the following date, as applicable:

(i) Foreclosure sale,

(ii) Assignment to the Fund,

(iii) Execution of a deed to the lender in lieu of foreclosure, or

(iv) Settlement on a sale by the mortgagor to a third party;

(c) Any expenses of foreclosure or title acquisition, including attorney's fees not exceeding 3 percent of the principal and interest components of the claim, which are actually and reasonably incurred;

(d) Expense items such as property taxes, hazard insurance premiums, and ground rent which are paid by the lender or servicing agent, prorated as applicable; and

(e) Other necessary expenses incurred by the lender for preservation of the property in accordance with the requirements of the insurance policy; and

(2) Subtracting the following:

(a) All amounts received by the lender or account of the mortgage after the institution of foreclosure proceedings or the acquisition of the mortgaged property;

(b) All amounts received by the lender from any source relating to the mortgaged property on account of rent or other income after deducting reasonable expenses incurred in handling the mortgaged property;

(c) All cash retained by the lender, including amounts held or deposited for the account of the borrower or to which the borrower is entitled under the mortgage transaction that have not been applied in reduction of the principal of the mortgage indebtedness or otherwise expended; and

(d) If the Fund is only the pool mortgage insurer, any benefit due under a primary mortgage insurance policy.

C. Items Not Covered. Coverage does not include:

(1) Loss due to:

(a) Casualty, or

(b) Title risk;

(2) Mortgage insurance premiums paid by the lender or servicing agent;

(3) Late charges;

(4) Expenses incurred for property repair resulting from:

(a) Accidental causes,

(b) Negligence or gross negligence,

(c) Flood,

(d) Fire,

(e) Termites,

(f) Vandalism,

(g) Defective construction,

(h) Undisclosed, preexisting conditions of environmental contamination,

(i) Physical damage, or

(j) Other causes except those permitted under §B(1)(e) of this regulation.

D. Settlement of Claims.

(1) The Fund shall settle mortgage insurance claims in cash.

(2) Settlement shall be by one of the four methods in §D(3)-----(6) of this regulation, at the Fund's election.

(3) Loan Assignment. The Fund takes an assignment of the mortgage and pays the claim. The claim may include all items described in §B(1) of this regulation except expenses related to foreclosure and acquisition of title.

(4) Fixed Percentage Settlement. When the Fund provides only primary mortgage insurance on the loan, the Fund pays the policy's stated percentage of the outstanding loan amount before foreclosure sale, and waives any interest in the property.

(5) Lender Acquisition Settlement. When the lender acquires title at foreclosure or by deed in lieu of foreclosure, and transfers title to the Fund, the Fund pays the:

(a) Full amount of the claim, if the Fund is both primary and pool insurer; or

(b) Amount of claim up to the percentage coverage specified in the primary mortgage insurance policy, if the Fund is only the primary mortgage insurer.

(6) Third Party Acquisition. When the property is sold to a third party under any of the following circumstances:

(a) At foreclosure;

(b) By the lender after taking title by deed in lieu of foreclosure; or

(c) By the borrower after the beginning of foreclosure proceedings, with the approval of the Fund in accordance with the following:

(i) If the Fund is both primary and pool insurer, the Fund pays the full amount of the claim as in §D(5)(a) of this regulation less net proceeds of the sale, or

(ii) If the Fund provides only the primary mortgage insurance, the Fund pays the lesser of the amount of the claim up to the percentage coverage specified in the primary mortgage insurance policy as in §D(5)(b) of this regulation, before crediting net proceeds of the sale, or the full claim after crediting net proceeds of the sale.

E. Access and Inspection. Before payment of a claim by the Fund, the insured shall provide access to the insured property for inspection by the Fund.

Md. Code Regs. 05.06.06.15